Short Update on Iran’s Threat today

Iran is threatening to cut off the Strait of Hormuz to all oil exports (basically everyone’s oil, Saudi, Qatar, Kuwait, Iraq etc) must pass through there.

Nice… If they do that, their fate is sealed, not even Obama may be able to save them. (It speaks volumes of their strategy that to date has worked, if they talk big enough, the world trembles. Qaddafi’s pleads of “why are you randomly bombing us, we are friends” fell on completely unafraid deaf ears)

But since they are unlikely to do that, we have a likely scenario of oil soaring short term (already did so on tension and the announcements passed $100 a barrel), and then coming back down after it blows over. Time to short?

In event of an actual strike on Iran, be it from them cutting off Hormuz or an unrelated strike by Israel and/or the US on their nukes, oil will soar even higher for the duration of the conflict, and then once again drop down.

The oil price equation is in this case not only very interesting for would be investors, but the entire geopolitical situation. As the world economy still hangs by thin threads, while Obama prays for signs of recovery before election, and the EU basically tethers on collapse with Greece, Italy and Spain on the brink, the last thing any of these world leaders want is a spike in oil prices.

This is really Iran’s true defense, with all their thinly veiled threats, Al Quds, Iraqi Shiites, Hamas, Hezbollah and a weakened Syria on their side (maybe), they could do precious little against Israel or NATO, not much more than Libya recently did or Iraq before them (not speaking about an occupation, but a bombing). Until they actually get Nukes, Iran remains a paper tiger.

The Gulf states badly want Iran to be reined in, and have a giant vested interest in the status quo oil economy. They will do their best at filling the gap in oil supplies while Iran is out (be it days or months and years if it leads to regime change or revolution / civil war). They want to stay rich, and cannot do so if oil soars so high, that it must dumped by the west as the main driver of the economy (ironically, this is why environmentalists should support a strike on Iran and the subsequent soaring oil pries). While US troops remained en masse in Iraq, they were the only complex question left on Iran’s possible reprisal options, via Shiite militias and Al Sadr. Now, they could potentially, in alliance with Maliki, Al Sadr and the other Shiite hard liners, take over Iraq (or try to and revert to civil war with the Sunnis)  but this remains a constant threat no matter what and highlights yet another reason why Iran’s regime must be taken out. Saddam served as a bulwark against the Islamic Republic, and the weak, sectarian Iraq that Obama recently left troop-less does not.

It remains to be seen if today’s world leaders will let the paper tiger become potential executioner of  mass genocide because of the fear of the gas pump.